The MN PUC announced in a news release on September 25, 2026 that they have launched an investigation into utility affordability. To quote Spike Milligan: “About bloody time!”
The Minnesota Public Utilities Commission (Commission) has opened a statewide investigation to examine the affordability of electric and natural gas utility service by rate-regulated utilities in Minnesota.
My initial thoughts on the PUC’s one-page presser follow next, along with the logic and evidence in support of these embryonic observations. This is all in the context that I have created ten models and written sixty articles since June 10, 2026 on energy affordability.
“adequate and efficient”
The Commission regulates three cornerstone service industries in Minnesota’s economy: electricity, natural gas and telephone. The Commission’s mission is to create and maintain a regulatory environment that ensures safe, adequate, and efficient utility services at fair, reasonable rates consistent with State telecommunications and energy policies. It does so by providing independent, consistent, professional, and comprehensive oversight and regulation of utility service providers.
As per Chart 1 below, average electricity use, for all three major classes of customers combined, grew 25.5% from 21,417 kWh per customer in 1984 to a peak of 26,876 kWh in 2008 then shrunk -16.7% to 22,375 kWh by 2025. This does not appear to be adequate or efficient.
It is important to note in this context, the Khazzoom-Brookes postulate which is that: “Energy efficiency gains can increase energy use even more directly by increasing the economic growth rate, not only by decreasing the effective cost of energy.” This is sometimes called the rebound effect or take-back effect as well as the Jevons paradox.
Chart 1
“customer bills“
The inquiry will evaluate how Commission regulatory practices, state and federal requirements, and other factors contribute to customer bills — and whether changes are warranted to better support households, businesses, and agricultural customers across the state.
As per Chart 2 below, average electricity bills, for all three major classes of customers combined, inflated 33.0% from $1,142 per customer in 1984 to $1,519 in 2002 then skyrocketed 86.6% to $2,834 by 2025.
The period of 2002 to 2025 was driven by Minnesota’s: Renewable Energy Objective (REO) of 2001; Renewable Energy Standard (RES) of 2007; and Clean Electricity Standard (CES) of 2023.
Chart 2
This investigation will assess whether the Commission’s current tools adequately address affordability concerns and whether new regulatory or legislative approaches could improve outcomes while maintaining safe, reliable, and increasingly clean utility service.
Rate of return, or cost plus, regulation of public utilities has been around since at least 1877. Under this approach, in sum, the allowable revenue equals operating costs (e.g. labor and maintenance) plus return of capital (i.e. depreciation) and return on capital (i.e. ROE).
Prof. David Newberry pointed out such regulation offers: “poor incentives for efficiency and a tendency to encourage excessive capital-intensity i.e. the Averch-Johnson effect (postulated by Averch & Johnson 1962; confirmed by Baumol & Klevorick 1970; proved by Petersen 1975).”
“strong position“
Minnesota is in a relatively strong position regarding the affordability of utility services. For example, in 2024, Minnesota had the 8th lowest average residential electrical bills in the nation[.]
As of October 1st 2026, Minnesota had the 7th lowest average residential electricity bills in the nation at $124.24 per month or $1,490.88 per year. However, MN ranked 31st in the country in terms of average residential electricity rates at 17.45 ¢/kWh.
As per Chart 3 below, average electricity prices inflation from 2002 to 2025, for all customer classes combined, was 118% for MN, 96.2% for the Midwest (MW) and 89.4% for the US.
Chart 3
“rate increases“
[T]he Commission has disallowed over $1.5 billion from utility proposed rate increases over the past several years.
As per Chart 4 below, the MN average electricity price per MMBtu soared by 118% from $16.99 in 2002 to $37.12 in 2025, whereas natural gas (NG) diminished by -8.8% from $5.33 to $4.86.
As per Chart 5 further below, the ratio of those two average prices per MMBtu, of electricity divided by NG, hit a low of 227% in 2006, then has since risen by 3.4x to 763% in 2025.
Chart 4
Chart 5
“support affordability“
The Commission has also taken multiple steps in recent years to support affordability — including improvements to low-income programs, limiting executive compensation recoverable in customer rates, and prohibiting recovery of utility lobbying expenses.
As per Chart 6 below, PUC-regulated MN electricity revenues per year exploded by 131% from $3.6 Billion in 2002 to $8.3B in 2025, whilst NG ones increased by 26.7% from $1.9B to $2.4B.
As per Chart 7 further below, average authorized electricity utility ROE (returns on equity) declined over time from slightly below 11% in 2002 to under 9.5% in 2026.
Although the MN AG challenging the PUC on electricity affordability, ROE is a relatively small numerator over the massive capital base denominator, the latter being driven by renewables.
Chart 6
Chart 7
“rising inflation“
With rising inflation and world events increasing energy costs for Minnesotans, we can’t solve the affordability puzzle alone.
As per Chart 8 below, the electricity Consumer Price Index (CPI) for Minneapolis St Paul (MSP) nearly doubled “all items CPI” inflation from 2002 to 2024 at 131% compared to 67%.
Chart 9 further below makes this even clearer, which subtracts electricity CPI from inflation. That shows electricity prices reducing inflation from 1978 then fuelling it since 2002 onwards.
Chart 8
Chart 9
“reasonable rates”
Indeed, even if the Public Utilities Commission sets reasonable rates for families and businesses, this doesn’t always translate to affordable bills.
As per Chart 10 below, the index of average MN electricity prices and bills both take off from 2002 by 118% and 86.6% respectively, whereas average MN electricity uses shrinks by -14.6%.
Note that bills are revenues divided by customers, and revenues are prices times uses.
Chart 10
“explore ideas“
Through open conversation and ideas from both state and national experts, we want to explore ideas that could help Minnesotans better afford their electric and gas bills.
The shorter term solutions to be implemented in the first half of 2027 include:
- lift the moratorium on nuclear power;
- impose a moratorium on banning natural gas;
- impose a moratorium on retiring coal;
- impose a moratorium on expanding renewables.
The longer term solutions to be explored and pursued from the second half of 2027 include:
- making the four shorter term solutions above permanent;
- make PUC commissioners elected positions, with term limits if and when rates are above inflation (e.g. CPI+X);
- move from disincentive regulation (i.e. rate of return) to incentive regulation (e.g. CPI-X);
- open up the unnatural franchise monopoly markets to genuine competition.
“the inquiry“
The Regulatory Assistance Project (RAP) will facilitate the inquiry, which will include informational sessions at the Commission from 9:30 to 12:30 on October 13, November 2, and December 8, 2026, as well as opportunities for written public comment. This investigation will culminate in a final report, with recommendations to the Governor and Legislature in early 2027. Additional information, including participation options and docket materials, is available on the Commission’s website.
It is very important to note that me asking the PUC to “look in the mirror” does not mean I think commissioners and staff are either corrupt or incompetent. The system is the problem. As predicted by Public Choice and Averch-Johnson, it incentivizes energy unaffordability.
I intend on attending, and perhaps speaking at, these informational sessions. I also intend, on behalf of American Experiment, to submit written public comments. Please join me.
Source: “A Day at the Minnesota Commission” from Public Utilities Fortnightly Magazine (July 2026)